US EMPLOYMENT – Weakness in technology and financial sectors
Despite remaining solid and resilient for several months, it seems that the US labour market has started to experience some negative effects from the Fed’s aggressive monetary tightening. Using the QuantCube Job Openings Nowcast we examined current US labour market conditions in the technology and financial
sectors.
The first sector to be hit by mass layoffs is the technology sector, with tech giants – including Microsoft, Meta and Twitter – announcing thousands of job cuts and hiring freezes.
To provide timely insights into the current labour market, QuantCube aggregates thousands of online job offers on a daily basis to track the evolution of official job openings at country and sectoral levels.
Technology sector
Exhibit 1 indicates the trend in US job openings in the technology sector estimated by the QuantCube Job Openings Nowcast. We started to observe a significant drop in job openings from April 2022, correctly anticipating the recent decisions by tech companies to halt hiring and control headcounts. This reflects the drop in job offers by S&P 500 companies such as Microsoft, Applied Materials and Lumen, as shown in Exhibit 2.
Financial sector
The QuantCube US Job Openings Nowcast suggests that the technology sector is not the only one impacted by the softening labour market. Exhibit 3 shows that the job offers published by companies in the financial sector have also been weakening. This is reflecting the lower-than-expected Q3 2022 profits reported by major banks as they increased their provisions for bad loans to prepare for a possible recession.
The financial services firms that caused the biggest drop in the QuantCube Job Openings Nowcast are Citigroup, American Express and JPMorgan Chase. Their job offers have nearly halved compared to May 2022 as Exhibit 4 indicates.
A slowdown in the job market is generally perceived by central bankers as a necessary step to reduce excess demand and get domestic inflation back to healthy levels. However, it remains to be seen whether the Fed’s latest action is sufficient to contain the threat from a possible second inflationary spiral without causing severe and persistent job losses.